Employment Multiplier

From Open Risk Manual

Definition

Employment Multiplier is a concept used in Multiplier Analysis and measures the ratio of the total economy-wide indirect/induced employment of all industries in the economy to satisfy a one-unit increase in the company’s total employment.

For each industry, the employment multipliers represent jobs created per unit of currency of additional final use.

Formula


Z = E (I - A)^{-1}

The employment multiplier for sector j indicates the total change in employment from a unit change in direct employment in sector j. The numerator is the sum of interdependence coefficients for sector j weighted by average employment per unit of output in each sector, or the direct plus indirect effects of a unit change in final demand. The denominator is average employment per unit of output in sector j, or the direct effect of a unit change in final demand.

References